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Cryptocurrency: The Dark Side Of Investing

Disclosure: The author and American Dream Investing own shares of Disney, but have not invested in cryptocurrencies at the time of this writing.

Like the characters in the latest Star Wars film, I’m grappling with an inner struggle.

Do I stick to my core investing values and principles and ignore the cryptocurrency craze? Or, do I succumb to the “dark side” and buy some Litecoin or Bitcoin, hoping that demand keeps rising and prices continue to soar?

I know the reasons why I bought Walt Disney DIS -1.12%shares three years ago and why I’ve held onto them: they have an unparalleled collection of entertainment properties like Star Wars and Marvel, strong management, growing free cash flow and a history of raising their (admittedly paltry) dividend. It’s been a mostly solid, albeit unspectacular stock in my portfolio, despite the fact that its year to date performance is significantly trailing its broader index.

On a fundamental level, Disney passes my litmus test for an investment. Cryptocurrencies, on the other hand, do not. Despite that, I’m still tempted to make a calculated play on cryptos and their potential long-term future after careful consideration and due diligence.

I understand that there’s a basic concept of supply and demand at work here that’s driving prices so high. There will only be 21 million Bitcoins mined and afterwards, no more will be added to the circulation.

But I can’t pay my rent using Bitcoin or buy health insurance with Ethereum (not yet, at least). There’s a high risk of fraud, market manipulation and account hacking. The volatility of the crypto market is enough to make a professional rollercoaster tester queasy.

Still, the money keeps pouring in and prices continue to rise. CNBC spends half the trading day discussing the markets and the rest of the time talking about Bitcoin.